recently was asked by a close friend to look at his s- corp transactions and noticed that during the first year he had quite a few transfer between business checking and business savings. how should those transactions be treated, recorded? I suggested he stop using his savings account wouldn't that be considered a distribution or compensation?
thank you in advance for the feedback.
you say both accounts are business accounts, savings and checking
nothing wrong with transferring the funds, they are still in the business, just the location has changed
no it is not a distribution unless the savings account is personal
You would confirm the FEIN/SSN on each account. Corporations are Separate from the people.
I have a related question. I transfered money from my business savings account into my business checking account and now it shows up as 'uncategorized income' in my P&L report. This money should not be considered income as it was made the previous year and set aside for tax payments. Can someone explain how to categorize this transfer so it does not show up as income?
When you transfer funds, you move money from one bank account to another. Usually, QuickBooks provides suggestion on the specific category to use for each downloaded transaction base on its description.
For more insights about recording a funds transfer between two accounts, you can check this article: Transfer funds between accounts.
When a transfer is recorded in QuickBooks the accounts and financial statements are affected as follows:
Also, I'd recommend consulting with an accountant so you'll be guided accurately in categorizing your transactions.
Feel free to leave your comments below if you have other questions.